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Practical and Regulatory Aspects of Subsoil M&A in Kazakhstan

Practical and Regulatory Aspects of Subsoil M&A in Kazakhstan. Yerzhan Yessimkhanov GRATA Law Firm London, 2011. Main Issues. K ey facts to be confirmed in the process of due diligence of a subsoil company ;

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Practical and Regulatory Aspects of Subsoil M&A in Kazakhstan

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  1. Practical and Regulatory Aspects of Subsoil M&A in Kazakhstan Yerzhan Yessimkhanov GRATA Law Firm London, 2011

  2. Main Issues • Key facts to be confirmed in the process of due diligence of a subsoil company; • Regulatory approvals to be obtained for transfer of a subsoil use right / shares in a subsoil user / shares in a controlling company.

  3. Due Diligence • Main asset – right to extract minerals (subsoil use right), based on contract with the state; • Contract might be terminated by the state in case of any material violation by subsoil user; • Due diligence shall confirm absence of any material violations / compliance with obligations.

  4. Due Diligence (cont.) Obligations of Subsoil User: • Execution of work program (program of exploration / production activities and investments); • Environmental; • Social; • Historical costs; • Procurement procedures; • Reporting; • Other.

  5. Regulatory Aspects APPROVALS - waiver of state pre-emptive right; - anti-monopoly approval. 5

  6. Regulatory Aspects (cont.) STATE PRE-EMPTIVE RIGHT • applicable to subsoil use right transfer, ALL share transfers and “connected objects” transfers. Exceptions are very limited; • Ministry of Oil and Gas (MOG) or Ministry of Industry and New Technologies (MINT); • consequences: invalidity of transaction / termination of subsoil contract; • time: 70 business days; • effectiveness: 6 months. 6

  7. Regulatory Aspects (cont.) ANTI-MONOPOLY APPROVAL • applicable to transactions where aggregate assets of vendor and purchaser exceed approx. US$ 20 million; • Agency on Protection of Competition (Anti-Monopoly Agency); • Time – 1-2 months. 7

  8. ANY QUESTIONS? Yerzhan Yessimkhanov Counsel GRATA Law Firm yyessimkhanov@gratanet.com 8

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